9911796707
TMI Blog2016 (6) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... any case cannot exceed the exempt income. Therefore, on the facts of the case and respectfully following the ratio laid down by the Hon’ble Delhi High Court in Maxopp Investment Ltd. vs. CIT (supra), we set aside the order of the Ld. CIT (A) and direct the Assessing Officer to re-compute the disallowance restricting it to the amount of dividend earned during the year. The issue is restored to the file of the Assessing Officer for the limited purpose of verification of the dividend income earned by the assessee during the year. - Decided in favour of assessee - ITA No. 3461/Del/2013 - - - Dated:- 2-6-2016 - Shri G. D. Agrawal, Vice President And Shri Sudhanshu Srivastava, Judicial Member For the Appellant : Shri C.S. Aggarwal, Sr. Adv. Shri Vishal Kalra, Adv. For the Respondent : Ms Susan D. George, Sr. DR ORDER Per Sudhanshu Srivastava, Judicial Member The present appeal is preferred by the assessee against the order dated 28.03.2013 passed by the Ld. CIT(A)-XVII, New Delhi for assessment year 2006-07. 2. The facts of the case are that the assessee, a company incorporated under the Companies Act, 1956 on 28.01.1994, is engaged in the business of product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income (Rs.) i. Hindalco Industries Ltd. 21,000 3,320 ii. Torrent Pharmaceuticals Ltd. 40,000 3,200 iii. Reliance Industries Ltd. 1,000 750 iv. Forbes Gokaka Ltd. 24,000 3,000 v. Ultratech Cement Ltd. 99,000 735 vi. Indo Gulf Fertilizers Ltd. 50,000 2,120 vii. Larsen and Turbo Ltd. 99,000 21,437 Total 3,34,000 34,562 4. The Ld. AR also submitted that none of the aforesaid shares were acquired by the assessee, instead such shares had been acquired by M/s Gujarat Bottling Company Private Limited ( GBCPL ) which company was eventually amalgamated with the Appellant. It was submitted that aforesaid investments were acquired by GBCPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had no application (in so far as the AY 2006-07 is concerned). Thirdly, no-income had been earned / received during the year on any investment made by the assessee . And fourthly, in fact no investment had been made by the assessee for the purpose of earning such income which was not includible in the total income, as all such investments (except ₹ 1,00,000 which is miniscule) were made by GBCPL on which dividend of ₹ 34,562 had been received. It was submitted that the Ld. CIT (A) has erred in holding that any expenditure was disallowable when no such expenditure had been incurred. In fact, there was no nexus between the expenditure incurred and investments made, more so when it is admitted fact that the assessee has not borrowed fund for making any investment in the subsidiaries. In this regard, reliance is placed on the decision of the Gujarat High Court in the case of CIT vs Gujarat Narmada Valley Fertilizers Co Ltd (Tax Appeal No 1151 of 2013), wherein it was held that no disallowance under section 14A of the Act is warranted if the dividend income is earned from the investments made in earlier years and no new investments were made during the year under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of REI Agro Ltd vs DCIT (2014) (160 TTJ 107) (Kol) and affirmed by Hon ble Calcutta High Court in GA 3022 of 2013 of ITAT 161 of 2013 in its judgment December 23, 2013 wherein even in respect of disallowance to be made under Rule 8D (2)(iii), it has been held as under: 8. In respect of provisions of rule 8D (2)(iii), which is the subject-matter of the appeal in the assessee's hand, a perusal of the said provision shows that what is disallow able under rule 8D(2)(iii) is the amount equal to V2 percentage of the average value of investment the income from which does not or shall not form part of the total income. Thus, under sub-clause (iii), what is disallowed is V2 percentage of the numerator B in rule 8D (2)(ii). Again this is to be calculated in the same line as mentioned earlier in respect of Numerator B in rule 8D(2)(ii) of the Act. 8.1 Thus, not all investments become the subjectmatter of consideration when computing disallowance under section 14A read with rule 8D. The disallowance under section 14A read with rule 8D is to be in relation to the income which does not form part of the total income and this can be done only by taking into consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the assessment year beginning on or before the 1st day of April, 2001, concluded assessments could not be disturbed despite the fact that Section 14A had been expressly made retrospective with effect from 01.04.1962. The provisions of Section 14A, which were retrospective with effect from 01.04.1962 are now encapsulated in sub-section (1) of Section 14A. It is also clear that sub-sections (2) and (3) of Section 14A were introduced subsequently by virtue of the Finance Act, 2006 and were introduced with effect from 01.04.2007. However, although sub-sections (2) and (3) had been introduced with effect from 01.04.2007, they remained empty shells inasmuch as the expression such method as may be prescribed got meaning only by the introduction of Rule 8D by virtue of the Income-tax (Fifth Amendment) Rules, 2008 which was notified by the Central Board of Direct Taxes by its notification No.45/2008 dated 24/03/2008. 33. Dr Rakesh Gupta, the learned counsel, who had appeared for some of the assessees, submitted that Section 295 of the said Act empowered the Central Board of Direct Taxes to make rules for the whole or any part of India for carrying out the purpose of the said Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held that the provisions of Rule 8D of the said Rules has prospective effect and shall apply with effect from assessment year 2008-09 onwards. 36. Insofar as sub-sections (2) and (3) of Section 14A are concerned, they have also been introduced by virtue of the Finance Act, 2006 with effect from 01.04.2007. This is apparent, first of all, from the Notes on Clauses of the Finance Bill, 2006 [Reported in 281 ITR (ST) at pages 139-140]. The said Notes on Clauses refers to clause 7 of the Bill which had sought to amend Section 14A of the said Act. It is specifically mentioned in the said Notes on Clauses that:- This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent years. 37. Furthermore, in the Memorandum explaining the provisions in the Finance Bill, 2006 [281 ITR (ST) at pages 281-281], it is once again stated with reference to clause 7 which pertains to the amendment to Section 14A of the said Act that:- This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent years. 38. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irement of adopting a specific method of determining such expenditure has been introduced by virtue of sub-section (2) of section 14A. Prior to that, the assessing was free to adopt any reasonable and acceptable method. 42. Thus, the fact that we have held that subsections (2) (3) of section 14A and Rule 8D would operate prospectively (and, not retrospectively) does not mean that the assessing officer is not to satisfy himself with the correctness of the claim of the assessee with regard to such expenditure. If he is satisfied that the assessee has correctly reflected the amount of such expenditure, he has to do nothing further. On the other hand, if he is satisfied on an objective analysis and for cogent reasons that the amount of such expenditure as claimed by the assessee is not correct, h he is required to determine the amount of such expenditure on the basis of a reasonable and acceptable method of apportionment. It would be appropriate to recall the words of the Supreme Court in Walfort (supra) to the following effect:- The theory of apportionment of expenditure between taxable and non-taxable has, in principle, been now widened under section 14A. So, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
